Regulatory Reform

End the Madness by Letting States Legalize Sports Betting

With the National Collegiate Athletics Association (NCAA) Men’s Basketball Championship in full swing, sports fans around the nation eagerly follow the action not just to see how their teams performed, but how well they did in their March Madness betting pools, with the chance of winning a small sum of money by predicting the winner. Few realize, however, that their friendly wagers on the games are illegal due to an archaic federal statute. For the sake of the millions of fans who enjoy betting on the game and the constitutionally guaranteed sovereignty of the states, this law must be changed.

Gambling regulation has historically been a state matter. As a form of commerce conducted entirely within state borders, Congress generally leaves it up to the states to decide how it ought to be regulated. However, in the 1990s more than a dozen states contemplated legalizing sports wagering, which provoked concern, largely among the major national sports leagues, that more gambling would lead to corruption and an erosion of public trust in sports.

Acting on that fear, Congress passed the Professional and Amateur Sports Protection Act (PASPA), which blocked states that had not already legalized sports betting (namely, just Nevada) from doing so in the future. Congress justified this unprecedented intrusion into state matters by claiming a national interest in protecting the integrity of sports.

Over the past three decades, PASPA has proven to be a failure. The sports gambling market in the U.S. swelled from around $40 billion per year in 1991 to an estimated $140 and $400 billion per year today, with Americans filling out around 70 million brackets during March Madness alone. Clearly, preventing states from legalizing the activity has done little to stop the spread of sports betting, as explained in the recent Competitive Enterprise Institute study, Time to End the Madness around March Madness. What the ban has done is prevent states from legalizing sports betting, generating revenue, and instituting real, legally enforceable consumer protections. Worst of all, the law treats adults like children and makes criminals out of otherwise law-abiding citizens.

The law is also unconstitutional. As the State of New Jersey has argued many times in court, the Tenth Amendment to the Constitution reserves powers not delegated to Congress to the states and to individuals. Notably, the Constitution makes no reference to giving Congress the power to prevent states from legalizing certain types of commercial activities, such as gambling. The courts, however, have sided with the sports leagues, who have sued the Garden State each time it tried to legalize sports betting, arguing that this violated PASPA.

In October 2014, the New Jersey legislature repealed the state’s laws that explicitly prohibited sports gambling at casinos and racetracks, attempting to decriminalize but not expressly legalize the activity. Again, the sports leagues—led by the NCAA—sued. Disturbingly, federal courts have sided with the leagues twice, agreeing that PASPA not only barred states from legalizing sports betting but even precluded them from modifying their own laws in a way that appeared to conflict with spirit of federal law.

Though courts have rejected the argument that PASPA unconstitutionally prohibits state-based commerce, the U.S. Supreme Court has indicated interest in hearing New Jersey’s appeal, asking for the opinion of the acting Solicitor General on the case. Hopefully the Court will hear the case. Otherwise, we are left with a big problem—not just for sports betting for any issue on which the states deviate from Washington and attempt to repeal their own laws. The citizens of each state deserve to have their interests well represented by their own state lawmakers. And the states should be protected from federal legislators commandeering the will of state lawmakers and citizens. That’s what America’s system of federalism is all about—protecting states and individuals against federal overreach.

Meanwhile, PASPA has also done nothing to protect the integrity of sports. In fact, it has actually increased the likelihood of match-fixing. In Europe and much of the rest of the world where sports betting is legal, sports leagues rely on the gambling industry as an early warning system. Bookmakers can alert the leagues when they spot signs of match-fixing and work with the authorities to bolster game integrity, to mutual benefit. In the U.S., bookies who want to alert authorities to signs of corruption can’t do so without fear of being prosecuted.

Like alcohol prohibition, it is clear that the ban on sports gambling has been ineffectual and counterproductive. Not only is the law unjust, it is also a major case of government overreach. It is not the role of the federal government to protect the reputation of our sporting events or dictate the types of wagering individuals may engage in or states may authorize. It is time for Congress to place its bets on the American people and American federalism by repeal PASPA and letting states decide for themselves on the question of sports betting.

Michelle Minton is a fellow specializing in consumer policy for the Competitive Enterprise Institute.


In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and …

+ Regulatory Reform In Depth